Is There a Relationship between TELs and Default? Evidence from US Municipalities

28 Pages Posted: 2 Mar 2017 Last revised: 18 Jan 2018

See all articles by John A. Dove

John A. Dove

Troy University - Manuel H. Johnson Center for Political Economy

Date Written: January 1, 2018

Abstract

The economic effects of tax and expenditure limits (TELs) have been often studied in the literature. However, little research has addressed how TELs might influence the propensity for a jurisdiction to default on its obligations. This study specifically fills that void. Overall, the results indicate that while the likelihood of default increases as TELs become more restrictive, the magnitude is not particularly large. Once decomposed, it would appear that property tax limits increase the likelihood, while expenditure limits have the opposite effect, though the latter result is insignificant. The findings are robust to a number of specifications and provide potential policy implications.

Keywords: Sovereign Debt, Default, Tax and Expenditure Limits, State and Local Public Finance

JEL Classification: D78, H12, H63, H73

Suggested Citation

Dove, John A., Is There a Relationship between TELs and Default? Evidence from US Municipalities (January 1, 2018). Papers in Regional Science, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2925305 or http://dx.doi.org/10.2139/ssrn.2925305

John A. Dove (Contact Author)

Troy University - Manuel H. Johnson Center for Political Economy ( email )

Bibb Graves Hall
Troy, AL 36082
United States

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